PROVIDENCE, R.I. — A proposal to convert Rhode Island’s only for-profit hospitals back to nonprofits could cost the economically distressed City of Woonsocket more than $1.6 million a year in property tax revenues.

Prime Healthcare Services, Inc., a for-profit California company, on Tuesday presented a plan to the state Department of Health's Health Services Council to convert Landmark Medical Center in Woonsocket and the Rehabilitation Hospital of Rhode Island in North Smithfield to nonprofits. If approved, Prime would no longer be required to pay property taxes to either community.

The proposal drew sharp criticism from Woonsocket officials, who said the loss of tax revenues from Landmark would destabilize the city financially.

“We were blindsided by the application to go to a nonprofit,’’ Woonsocket Mayor Lisa Baldelli-Hunt told the council. “if you’d like to become a nonprofit that’s great … but we need the taxation that comes from that entity in order to have fiscal stability in the City of Woonsocket.”

State Sen. Roger Picard, D-Woonsocket, said that three years ago when Prime’s chief executive officer, Dr. Prem Reddy, offered to buy Landmark “the property taxes were a big piece’’ of the deal. “It never even occurred in our heads,’’ he said, “that the reverse would ever happen.’’

During the last three fiscal years, Prime has paid the City of Woonsocket more than $4 million in property taxes, according to data from the city’s tax assessor.

Prime has aggressively expanded its reach by buying up distressed hospitals around the country, including Landmark in December of 2013. The City of Woonsocket, then on the verge of its own bankruptcy, considered the hospital — which then had about 1,100 employees — as central to its economic recovery. As a for-profit company, Prime would pay taxes and invest $30 million in capital improvements. After an extensive review process, the health department and the state attorney general approved the deal.

Landmark, which in 2013 was losing $10 million to $12 million per year, now operates on “pretty much a break-even basis,” Landmark’s CEO, Michael Souza, said.

Prime now owns 44 hospitals around the country, including 12 that it has converted to nonprofits under a foundation it established in 2006, said Fred Ortega, senior director, government relations at Prime Healthcare. If the application in Rhode Island is approved, that would bring their nonprofit hospitals to 14.

“Prime Healthcare has honored all of its obligations in the state,’’ Cindy Warren, counsel for Prime Healthcare, said. “Both the Foundation and Prime Healthcare Inc is more than financially viable …”

If Landmark changes to a nonprofit, Souza said, there would be “no staff reductions” and “no change in contracts.” All of the agreements made during the sale, he said, would be honored.

But Victoria M. Almeida, a lawyer and the council chairwoman, questioned Prime’s contention that it has been a good corporate citizen given that converting Landmark to a for-profit would be a big financial hit to the city.

“In accordance with the applicable laws there is a tax deduction in this,’’ Radha Savitala, deputy general counsel for Prime, said.

“So there’s a strategic method that they’re doing this to reap a tax benefit,’’ Coia said.

Other nonprofit hospital systems make payments in lieu of taxes, known as PILOT payments, to their home cities. Care New England, the state’s second-largest hospital system, makes about $250,000 a year in PILOT payments to Providence, said Souza, who until recently was president of the Hospital Association of Rhode Island.

Until last year, Souza said, Lifespan, the state’s largest hospital system, made about $800,000 in annual PILOT payments to Providence. But it stopped making those payments in fiscal 2017.

Lifespan's payments to the City of Providence, which began in 2012, were based on a "three-year commitment of $800,000 per year plus one additional payment of $400,000 in 2015, Lifespan's spokesman, David Levesque, said. "We did so out of a strong commitment to our host city and the challenges Providence was facing."

“So I want to know,’’ Almeida, the council's chairwoman, said, “.... what kind of citizen, will the new nonprofit Landmark hospital be?”

The council has hired a Boston lawyer to review the proposed conversion, which is expected to be reviewed when it meets again in June.